April 19, 2024
The concept of return on investment (ROI) when dealing with rental properties is often looked at in an extremely simplified manner. ROI for rental property improvements is calculated as the total cost of upgrades divided by the difference in rent received over a 12 month period. However, this is not the full picture. Property improvements can have many other knock on effects such as reduced maintenance, higher quality tenants who in turn take better care of the property as well as increased tenant satisfaction resulting in lower vacancy. (See our blog post on Increasing Tenant Satisfaction) It's impossible to fully quantify all the outcomes that property improvements will create, but we are able to differentiate between effective and non-effective upgrades.It's important to strike the balance between creating a beautiful and appealing living space, that increases rentability, with a functional rental that reduces maintenance and general wear and tear.
Furthermore, all rental properties are unique in some way and it's vital to consider which upgrades would be most effective for your specific property. Location, for example, is a huge factor. Adding a designated parking spot wouldn't have the same impact for an investment property in Star than it would for a rental in downtown Boise. Similarly, quartz countertops may mean more to prospective tenants looking to rent in Meridian and Boise as opposed to more rural areas. So first, owners need to define who their tenant target market is. Only then can they decide which upgrades would be best suited to that particular group. It's important to also not make improvements that don't suit the neighborhood. Alienating your property from the surrounding area and houses can make it difficult to rent. Having said that the most widely accepted and effective rental property improvements include new paint, bathroom and kitchen remodels, new flooring, adding bedrooms and communal space upgrades. Let's discuss each of these with particular attention to their effectiveness in the Boise rental market.
Paint
Repainting your investment property can give it a fresh, new and clean look. How often this should be done varies. Usually touch ups are sufficient after tenant move-outs, but a complete repainting should be done every 3-6 years. I's important to not choose colors that are too personal, rather stick to neutral tones that appeal to a wide range of tenants.
The walls are what generally come to mind when discussing paint in rental units. However, paint can really bring to life other aspects of the home. A fireplace with dirty and weathered brick can be transformed into a home highlight, bringing a fresh modern look. Similarly, outdated kitchen cabinets that are off-putting to tenants can be converted to an alluring feature.
Eggshell finish is the best type of paint for rental unit's interior walls as this hides scuffs much better, it's easy to wash and generally more durable. A semi-gloss finish is best for trim and bathrooms as it is highly durable and more mold resistant. On average, you can expect to pay $2 per square foot of interior rooms.
Flooring
Flooring has changed considerably in the last couple of decades and although hardwood floors remain the gold standard, they can often be too expensive to justify. Carpets are increasingly becoming outdated and replaced with Luxury Vinyl Plank (LVP) flooring. And for good reason! Carpets are difficult to keep clean and wear quickly in high foot traffic areas. Not to mention the issues pets can cause, with Boise being a pet friendly city. LVP is extremely easy to keep clean, can last up to 20 years and look just as good then as the day it was installed. Switching to this flooring can also remove the carpet cleaning costs at tenant move-out reducing deposit disputes and turnover time. We recommend checking out
LL Flooring if you're looking to add this property improvement.
Bathrooms and Kitchens
This is a property improvement, where it can be easy to overspend. Remodeling kitchens and bathrooms can be an exciting endevour and it's important to remember you're not creating your dream kitchen.
Solid countertops such as granite or quartz can have a great return, being extremely durable, easy to clean and less maintenance. Although the upfront cost might seem steep, avoiding the peeling laminate or grout repair with tile, saves money over the long-term. Plus "quartz countertops" will really make your rental listing pop.
Upgrading your appliances to be stainless steel and energy efficient will definitely take the kitchen to the next level. We recommend visiting a supplier with a ding and dent section. These small imperfections are often unnoticeable and the appliance works just as well, and for 50% off!
American Freight on Franklin Road has a great selection.
Additions
Additions will add the most value to your property and are usually the most costly. However, some don't need to break the bank. For example, keeping up with general housing trends, and adding a designated workspace is a great way for your rental to standout. This can be achieved by installing a permanent desk in an unused landing area or nook, and is extremely effective in short and mid-term rentals.
More expensive options could be removing a wall to create an open plan layout or finishing your basement with egress windows to add bedrooms and living space.
Adding an ADU has become a great option in Boise since the city relaxed it's ADU requirements. Read all about those updates,
here.
Communal Spaces
Communal and, in particular, outside spaces are where Boisean's needs should be considered the most. With so much access to nature and Boise having a fairly active lifestyle, many tenants bring with them bicycles, skis, camping gear, floats, you name it! A secured storage shed or storage area can be the deciding factor for many tenants when considering options. Furthermore, fenced yards for dogs and fire pits fit perfectly with the Boise lifestyle.
Laundry is another great way to maximize ROI. If your multifamily property has a shared laundry space, removing coin operated machines and installing credit card readers can increase use, and in turn, revenue. Plus it saves you having to deposit coins every few months. Keep in mind that laundry facilities should always be viewed as an asset to tenants, so make sure your laundry cycle costs are slightly less than the nearest laundromat.
Bonus Quick Tips
- Install energy efficient lightbulbs.
- Seal all window/door gaps to avoid unnecessary heating/cooling costs.
- Make technological upgrades such as smart thermostat, doorbell cameras and keyless entry.
- Finally, make sure to do all upgrades when units are vacant!
Maximizing your ROI is more than the simple calculation of upfront costs and increased rent. While the financial impact of upgrades can't be ignored, it's equally important to recognize the broader benefits they bring, and benefits that can make your investment property ownership experience, that much better. Furthermore, rental property improvements in Boise will have unique outcomes and considering upgrades should be viewed through a Boise resident's lens and what would appeal to your particular tenant demographic.
